Free trade encompasses many practices and theories. The most common application of free trade is the reduction or removal of commercial barriers between countries. This allows a freer flow of labor and goods between member countries in a trade pact. As free trade agreements become more common around the globe, the positive impact on developing countries has been touted as one of their greatest successes. There are several advantages to developing countries that participate in free trade.

Higher Employment Rates

As developed countries are able to move their operations into developing countries, new job opportunities open up for local workers. Increased levels of employment lead to a higher standard of living and more consumer purchasing. This ultimately sparks the country's economy and may help to develop locally owned business.

Less Child Labor

Child labor occurs in developing countries for many reasons but one of the main reasons is lack of technology. Children are used as a cheap substitute for manufacturing equipment. Free trade allows companies to invest in equipment and pay higher wages to adult workers through foreign investment. With higher family incomes, children are able to attend school rather than work.

Access to New Markets

Not only does free trade allow foreign-owned companies to establish themselves in developing countries, it also allows native companies to sell to foreign markets. This expands their customer base and leads to new products and services and the viability of investing in innovation. This is particularly true for small businesses in developing countries. These companies no longer have to worry about absorbing the costs of tariffs and other barriers to market entry and can sell their products freely.

Higher Levels of Investment Capital

Most free trade agreements also reduce restrictions on foreign investment. With new capital entering a developing country, it begins an upward productivity cycle that stimulates the entire economy. An inflow of foreign capital can also stimulate the banking system, leading to more investment and consumer lending.

Increased Life Expectancy

An increase in employment levels, incomes, and the general standard of living alleviates hunger and lack of medical care in developing countries. Preventative medical care including checkups and vaccinations are available to more of the population. It also increases the number of children who are educated and attend school regularly. The ultimate result is an increase in the average life span and a reduction in infant deaths.

About the Author

Angie Mohr is a syndicated finance columnist who has been writing professionally since 1987. She is the author of the bestselling "Numbers 101 for Small Business" books and "Piggy Banks to Paychecks: Helping Kids Understand the Value of a Dollar." She is a chartered accountant, certified management accountant and certified public accountant with a Bachelor of Arts in economics from Wilfrid Laurier University.